US markets closed mostly lower on Yellen's testimony

11 Feb 2016 Evaluate

The US markets closed mostly lower on Wednesday, with the Dow industrials and S&P 500 relinquishing their gains in late-afternoon trade, leaving the benchmark indexes with their longest stretch of consecutive losses in months. Materials and energy stocks led the losses, following a drop in oil prices, with West Texas Intermediate crude oil sinking below $28 a barrel for the first time in 3 weeks. Stocks had enjoyed healthy gains earlier in the session as Federal Reserve Chairwoman Janet Yellen delivered testimony and answered monetary-policy questions in front of a congressional committee but abruptly turned lower in afternoon trading. Fed Chairwoman Janet Yellen stated that the US central bank is watching the growing risks facing the economy but is unlikely to have to reverse course and cut interest rates. Yellen added that financial conditions have become less supportive to growth but the US economy could still continue to expand. Strong consumer and business spending and a healthy labor market pointed to continued moderate growth and gradual rate increases. The Fed chairwoman didn’t say anything about the US central bank’s own forecast, made in December, that it would raise interest rates four times in 2016. Yellen did stress the Fed wasn’t in automatic tightening mode. The Fed chairwoman said there are downside risks largely stemming from uncertainty about the health of the Chinese economy. Yellen balanced these concerns with suggestions that the economy could grow at a moderate pace without much damage, or even exceed our projections making clear the US central bank has moved to a watching-and-waiting stance.

On the economy front, the Treasury Department reported the federal government ran a budget surplus of $55 billion in January, and a fiscal year-to-date deficit of $160 billion. For the year to date, the deficit is 17% less than the first four months of the last fiscal year, which ended in September. But the deficit is expected to widen, with a tax deal passed by Congress in December partly to blame. The deal retroactively extended and made permanent many temporary tax breaks for corporations and individuals, including the research and development credit used by certain companies. Total receipts were up 2% in January, but corporate tax collection fell by 8% in the month. For the fiscal year, corporate receipts are down 10%. The Congressional Budget Office is projecting a deficit of $544 billion for fiscal 2016, which would be more than $100 billion above the shortfall for 2015.

The Dow Jones Industrial Average lost 99.64 points or 0.62 percent to 15,914.74, the S&P 500 was down by 0.35 points or 0.02 percent to 1,851.86 while the Nasdaq was up 14.83 points or 0.35 percent to 4,283.59.

The Indian ADRs closed mixed; Tata Motors was down 0.55%, Dr. Reddy’s Lab was down 0.21% and ICICI Bank was down by 0.03%. On the other hand, Wipro was up 0.05% and HDFC Bank was up 0.04%.

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